Mergers and Acquisitions

Paper Summary:

This paper examines how, although many companies have experienced enormous success in the arena of mergers and acquisitions (M&A), recent empirical studies suggest that, throughout the past three decades, the majority of M&A deals did not deliver what was expected, nor did the companies involved do as well as peer companies that steered clear of M&A. It explores why M&A deals go awry by looking at how performance measures might be used to judge the effectiveness of mergers and takeovers.

From the Paper:

"A recent study by the Boston Consulting Group (BCG) tracked companies' performance over a 10-year period from 1992 to 2002 (Hahn, 2004). The results showed that M&As are frequently successful in the long run, despite research that says that they are more likely to fail. The consulting group even lists Time Warner among the successful companies, even though the company's stock plummeted after merging with America Online Inc. and the company a nearly $50 billion write-down on the deal in 2003. Over the 10-year period of the study, however, BCG calculates that Time Warner had an annualized total return to shareholders of 68.8 percent."

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